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The business tax climate in Massachusetts has declined significantly over the past year, with the Commonwealth dropping to the fifth worst state in the country for competitiveness, according to a new report from a national tax watchdog.
Massachusetts had the steepest fall from last year in the nation, dropping 12 spots to 46th for overall taxation in the 2023 State Business Tax Climate Index, a ranking published by the Tax Foundation that compares state tax systems.
“That means we are overtaxing our employers and our residents, both,” said Jon Hurst, president of the Retailers Association of Massachusetts. “To be in the bottom five states, it’s not a good sign to either our tax-paying families or to employers, current or prospective. We’ve got to work on this.”
A driver behind the nosedive in tax competitiveness, the Tax Foundation found, is the state’s new Fair Share Amendment – or Millionaire’s Tax – which taxes incomes over $1 million an extra 4%.
“While the $1 million threshold at which the surtax kicks in is indexed to inflation, the surtax imposes a sizable marriage penalty that the Commonwealth lacked previously,” authors wrote in the report which came out last week. “This policy change represents a stark contrast from the recent reforms to reduce rates while consolidating brackets in many other states.”
The crumbling tax system should not be a surprise, said Paul Craney, a spokesman for Massachusetts Fiscal Alliance, a staunch opponent of the Millionaire’s Tax. He called out proponents who pledged that the surtax would strictly apply to individuals with an income of over $1 million.
“With a flip of a switch, the legislature lowered that threshold to $500,000 for married people and the Tax Foundation is predicting a clear negative outcome from this,” Craney said in a statement.
Hurst, whose organization represents 4,000 businesses in the state, told the Herald on Friday that people and businesses alike are continuing to leave Massachusetts due to taxation.
Massachusetts is the fourth worst state in the country when it comes to out-migration, behind only California, New York and Illinois, according to data gathered earlier this year by Pioneer Institute, an economic policy think tank.
The Millionaire’s Tax has exacerbated the years-long problem, and former Celtics player Grant Williams used it as motivation to sign a four-year, $54-million contract with the Dallas Mavericks over the summer. If he stayed in Boston, the surtax would’ve reduced that amount to $48 million over the four years, he told The Athletic.
The Tax Foundation also called out a payroll tax that went into effect this year in Massachusetts’ poor ranking. The organization also found that the state dropped 33 spots from the 11th best state for individual taxes to the sixth worst.
Two glaring challenges facing small businesses across the Bay State, Hurst said, are its high unemployment and health insurance costs, both of which are the worst in the nation, according to the Tax Foundation.
Hurst is calling on state lawmakers to create more flexibility for small businesses on health insurance instead of imposing mandates and restrictions so they can be competitive with “big, self-insured businesses.”
Gov. Maura Healey signed a $1 billion-a-year tax relief bill earlier this month that Hurst believes will only go so far.
The package cuts the short-term capital gains tax from 12% to 8.5%, a business-backed move that has riled progressives who argue it gives a break to the wealthy. The compromise will cost the state $561 million in fiscal year 2023 and $1 billion a year starting in fiscal year 2027.
It also includes boosts to the rental deduction cap, a tax credit for a dependent child, disabled adult, or senior, and the statewide cap for a housing production program. The bill excludes estates valued up to $2 million from the estate tax by allowing for a uniform credit of $99,600.
“It’s going to help,” Hurst said, “but frankly, I think it’s a down payment on more action that has to come to make Massachusetts welcoming to investment, welcoming to entrepreneurs and to make sure that small businesses and consumers alike can be prosperous in the Commonwealth.”
Local News
New Hampshire is leading an effort from 25 states to challenge a Massachusetts gun law, and this month, they’re taking it to the Supreme Court.
The centerpiece of the argument is the Pheasant Lane Mall in Nashua, N.H., which reaches across state lines into Tyngsborough. If shoppers park on the south side of the mall’s parking lot, they might end up crossing state lines during a visit.
The attorneys general of New Hampshire and 24 other Republican-led states say this poses a potential problem for firearm holders. A New Hampshire resident who is legally carrying a firearm on their home state’s side of the parking lot may inadvertently be breaking the law when they cross the lot into Massachusetts, where it is illegal to carry without a permit.
Joining New Hampshire are the attorneys general of Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming, who are calling the arrangement unconstitutional. The states have rallied behind Phillip Marquis of Rochester, N.H., to ask the Supreme Court to protect out-of-state residents from Massachusetts’ firearms regulations.
“The geography of the mall is such that a New Hampshire resident might find themselves in Massachusetts if she parks on the south side of the parking lot or visits Buffalo Wild Wings,” reads a brief from the New Hampshire Attorney General’s Office to the Supreme Court. “If that person is carrying a firearm without a Massachusetts license — which would be constitutionally protected activity in most of the mall—that person risks being charged as a felon and facing mandatory incarceration in Massachusetts.”
The trouble began for Marquis in 2022 when he was in a car accident in Massachusetts, according to the brief. When police arrived, he informed them that he had a pistol on him and was subsequently charged with carrying a firearm without a license.
Marquis previously sued the Commonwealth for the burdens that Massachusetts’ firearms permit law creates on out-of-state visitors, but the Massachusetts Supreme Judicial Court denied his claims. They ruled in March that the state’s nonresident firearms licensing laws were constitutional, according to court documents.
Claiming that the Massachusetts court denied him his Second and Fourteenth Amendment rights, Marquis has petitioned the Supreme Court to federally overrule that court’s decision. In his petition, Marquis invoked New York State Rifle & Police Association, Inc. v. Bruen, where the court established that state firearms restrictions must be covered by the Second Amendment or adhere to historical firearms regulations.
Using Bruen, Marquis and the Republican attorneys general supporting him are aiming to prove that there is no justification for applying Massachusetts’ firearms restrictions to out-of-state residents and that to do so would be unconstitutional. However, the state’s Supreme Judicial Court found the law constitutional even under Bruen because it intends to prevent dangerous people from obtaining firearms, just as historical regulations have done.
“To the extent that the Commonwealth restricts the ability of law-abiding citizens to carry firearms within its borders, the justification for so doing is credible, individualized evidence that the person in question would pose a danger if armed,” the Supreme Judicial Court’s decision read. “Both case law and the historical record unequivocally indicate that this justification is consistent with ‘the Nation’s historical tradition of firearm regulation.’”
It’s not immediately clear if the Supreme Court will respond to Marquis’ appeal or when it will make any kind of decision, but lower courts are at something of a crossroads with how and when to apply Bruen to gun possession cases. As such, they are looking to the Supreme Court for a more definitive answer.
Since the proof of historical context that Bruen requires has led to some uncertainty, any ruling that these lower courts make is likely to amount to a partisan decision. However, if the Supreme Court provides more substantive clarity in a response to Marquis, these lower courts just might find the answer they are seeking.
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Massachusetts State Lottery players won two $100,000 prizes Friday from the day’s “Mass Cash” drawings.
The winning tickets were sold at the Roslindale Food Mart on Washington Street and McSheffrey’s of the South End convenience store (with Mobil gas) on Main Street in Woburn.
Mass Cash drawings happen twice daily, at 2 p.m. and at 9 p.m. It costs just $1 to play.
Overall, at least 625 prizes worth $600 or more were won or claimed in Massachusetts on Monday, including 6 in Springfield, 22 in Worcester and 14 in Boston.
The Massachusetts State Lottery releases a full list of winning tickets every day. The list only includes winning tickets worth more than $600.
The two largest lottery prizes won so far in 2025 were each worth $15 million. One of the prizes was from a winning “Diamond Deluxe” scratch ticket sold in Holyoke, and the other was from a “300X” scratch ticket sold on Cape Cod.
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